Practice Questions
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Which of the following is a supply-side factor that can contribute to a recessionary gap?
When production costs rise, businesses struggle to make goods. Other options are incorrect because Some might think that more consumer demand helps th...
How does an increase in aggregate supply affect inflation during a recessionary gap?
When more goods are produced, prices tend to go down. Other options are incorrect because This answer suggests that more demand causes higher prices; ...
How can supply-side factors influence a recessionary gap, and what role does government intervention play in addressing this issue?
Investing in technology and infrastructure helps businesses produce more. Other options are incorrect because Some might think raising taxes helps sav...
How can fiscal policy be effectively utilized to close a recessionary gap and promote GDP growth?
Increasing government spending and cutting taxes puts more money in people's hands. Other options are incorrect because Some think raising taxes helps...
How does a recessionary gap affect unemployment, GDP growth, and inflation in an economy?
In a recessionary gap, the economy is not doing well. Other options are incorrect because This option suggests that unemployment goes down, which is n...
What is a recessionary gap in economics?
A recessionary gap happens when the economy is not producing as much as it could. Other options are incorrect because Some might think a recession mea...
What occurs when aggregate demand is lower than the potential GDP in an economy?
When people and businesses want to buy less than what the economy can produce, it creates a recessionary gap. Other options are incorrect because Some...
What is the primary cause of a recessionary gap as it relates to aggregate supply?
A recessionary gap happens when people buy less stuff. Other options are incorrect because Some might think that if people spend more, the economy wil...
Which scenario best illustrates a recessionary gap in an economy?
A recessionary gap happens when unemployment is higher than normal. Other options are incorrect because This option shows full employment, which means...
Arrange the following steps in order to address a recessionary gap in Zeta's economy: A) Implement fiscal policies to stimulate demand, B) Identify the current unemployment rate, C) Assess the potential output using the production possibilities curve, D) Monitor the effectiveness of the policies over time.
First, we need to know the unemployment rate to understand how bad the recession is. Other options are incorrect because This option starts with asses...
Zeta's economy is currently producing at a point inside its production possibilities curve due to a recessionary gap. If the government decides to implement a fiscal policy aimed at reducing the unemployment rate, which action is most likely to help Zeta move towards its potential output?
Increasing government spending on infrastructure creates jobs. Other options are incorrect because Raising taxes means people have less money to spend...
If Zeta's economy is in a recessionary gap, what might be a likely consequence of this situation?
In a recessionary gap, the economy is not producing enough goods and services. Other options are incorrect because Some might think that a recession m...
In the context of Zeta's economy, a recessionary gap occurs when the actual unemployment rate is _____ the natural rate of unemployment.
A recessionary gap happens when more people are unemployed than usual. Other options are incorrect because Some might think that fewer unemployed peop...
If Zeta's unemployment rate is 9%, which exceeds the natural rate of 5%, what is the most likely underlying cause of this recessionary gap?
When the unemployment rate is high, it means many people want to work but can't find jobs. Other options are incorrect because This answer suggests th...
How does a recessionary gap affect the production possibilities curve (PPC) of an economy like Zeta?
A recessionary gap means the economy is not using all its resources well. Other options are incorrect because Some might think a recession means more ...
If a recessionary gap is to an economy's inefficiency, then a production possibilities frontier (PPF) is to what?
A production possibilities frontier shows the most goods an economy can make. Other options are incorrect because Some might think the unemployment ra...
Which of the following statements accurately describe the implications of a recessionary gap in Zeta's economy? Select all that apply.
Other options are incorrect because This statement is wrong because a recessionary gap means resources are not used well; This is incorrect....
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